Australian Accounting Standards Board Strategy and Operations

Question: Discuss about the Australian Accounting Standards Board for Strategy and Operations. Answer: Introduction The present study focuses on different stipulations under the accounting standard AASB 15 that mentions about the revenue of firms from contracts with the specific customers with special reference to the operations of Telstra. The current report to the auditing team of Telstra from the team of Deloitte states the procedures by which business entities can account for revenue as per the stipulations under AASB 15. In addition to this, the current report also elucidates in detail the reason behind replacement of the AASB 111 and 118 by the AASB 15. Furthermore, the present report to the auditing team of Telstra also expounds the expected impact of the new impact on the financial statements and the business operation of the company as a whole. Finally, the current segment explicates the importance of management of flexibility for incorporating the alterations for recognition of the revenue under the new standard. Telstra is the largest Australian telecommunication as well as media corpor ation that serve as a leading provider of mobile phones and other mobile devices, broadband internet connections among many others (Telstra.com.au 2016). Process by which the companies are required to account for revenue under AASB 15 The processes that the companies need to take into account for revenue under AASB 15 is to establish significant principles by which the reporting entity needs to report important information. The financial information to the different users of the financial declarations needs to be about the timing, characteristics and the amount of the revenues and the flow of the cash generated from the agreements with the customers (AASB 2015). The business entity Telstra needs to identify with the revenue in order to depict different transfer related to the promised goods as well as services to the specific customers to reflect the considerations that business entity is entitled in exchange of the products and services. According to this standard, the business entity needs to take into consideration different terms of agreement along with different pertinent facts at the time of implementation of the standard (Aasb.gov.au. 2016). In addition to this, the accounting standard needs to specify the accounting principles and information regarding revenue that is critical for the evaluation of the financial information of the business entity Telstra. The financiers as well as other users of the financial information also need to understand the total amount and the nature of revenue the company Telstra earns in a specific period (Aasb.gov.au. 2016). The management of the company Telstra needs to remove different inconsistencies as well as weaknesses associated to the existant standard by enhancing the practice of comparability of the revenue recognition across different business entities (Bdo.com.au. 2016). The company also can adopt the AASB 15 that can address the process of accounting for costs associated to contract acquisition in companies operating in the telecommunication industry. The steps that companies needs to follow for taking into account the revenue under AASB 15 are as presented in the diagram below: Therefore, the processes that the company needs to take into account for recognizing the revenue under AASB 15 involves the identification of the agreements with the specific customers, identification of the performance obligations as per paragraph 22 to 30 of the standard and determination of the transaction prices as per paragraph 47 to 49 of the standard (Charteredaccountants.com.au. 2016). Thereafter, the management of the business entity needs to allocate different transaction prices to diverse performance requirements as per the stipulations mentioned in the paragraph 73 to 75 of AASB 15. Finally, the management of the corporation needs to identify with the revenue at the time when different performance requirements as charted under paragraph 31 to 34 are satisfied (Dakis 2016). Reason behind issuing AASB 15 in place of the existing revenue standards 118 and 111 The AASB 15 adequately replaces the AASB 111 and AASB 118 for the purpose of addressing the identified inconsistencies and lack of tough notions concerning the process of recognition of the revenue stipulated under AASB 118 and construction contracts conditioned under AASB 111 (Deegan 2012). AASB 15 replaces the AASB 118 and 111 in order to provide a single model for revenue recognition based on the transfer of the promised goods and services against the consideration that the company can expect to receive for the particular transfer (Brown et al. 2014). The standard AASB 15 also intends to simplify the process of preparation of the financial declarations by lowering the total number of requirements that the company needs to follow. Again, the replacement of the AASB 111 and 118 by AASB 15 is also for the purpose of enhancement of the disclosures regarding revenue and the guidance concerning different transactions that were not appropriately addressed (Deloitte Australia. 2016) Possible impacts that recognition criteria can have on the business operations of Telstra The assessment of the impact of the recognition criteria stipulated under AASB 15 reflects the fact that there is limited influence on the process of revenue accounting. However, the company Telstra could face difficulties in meeting the compliance requirements (Horngren et al. 2012). This standard can affect not only the finances of the company Telstra but also the systems, procedures, different internal controls along with other elements of the entity can need time to develop. As per reports, the impact of the AASB 15 depends on the industry and the business model of Telstra. The AASB 15 can influence the timing of the revenue recognition in Telstra, processes of accounting, disclosure requirements along with the systems for keeping track of the AASB data (Landing.deloitte.com.au. 2016). The adoption of the new standard shall also call for the need of improvement in the communication with the external stakeholders of the organization. In addition to this, the value of the revenue r ecognition is also anticipated to change as well as the contractual covenants and the existing performance indicators (Landing.deloitte.com.au. 2016). Therefore, the implementation of the AASB is expected to have significant impact on the disclosures, income statement, and balance sheet of the company Telstra. As such, the company Telstra can therefore implement the changes after assessment of the financial implications of the standard and alter the process of revenue recognition from telecommunication services, rent of network facilities and advertising services among many others. Choices related to the revenue recognition under the new standard The choices related to the revenue recognition under the AASB 15 includes the identification of the contracts with the customers, combination of different contracts, contract modifications, satisfaction of different performance requirements among many others (Legislation.gov.au. 2016). In addition to this, the management of the corporation Telstra needs to be flexible enough for modifying the contracts that have the need of termination of the existing contracts and at the same time generation of the new contracts in accordance with the requirements stated in the paragraph 20 of the standard. Again, the corporations with overseas operations need to be flexible enough to handle two different sets of financial declarations for the revenue recognition as per the contracts with the customers. The maintenance of two different sets of financial records requires flexibility in the systems, increased cost of labour as well as auditing (Landing.deloitte.com.au. 2016). Furthermore, the manageme nt of the organization can impart training to the employees and bear accounting education costs for training the employees. The company can also design separate systems for catering to the needs of auditing the recognised revenues of the entity in order to ensure proper implementation of the standard. Conclusion The above mentioned report sheds light on different aspects of the guidelines prescribed for the revenue from the contracts with the customers under AASB. The above report to the auditing team of Telstra can help in gaining an overview of the 5 stages in the procedure involved in taking into account the revenue as stipulated under the new standard AASB 15. In addition to this, the above report also helps in understanding the inconsistencies of the existing standards and the reason for implementation of AASB 15. Moreover, the study explains the impact of the standard on the financial reporting, operations and management of flexibility in organization. References AASB, C.A.S., 2015. Revenue from Contracts with Customers. 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